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What's in the Cards for BlackRock (BLK) in Q2 Earnings?

BlackRock, Inc. BLK is slated to report second-quarter 2020 results on Jul 17, before the opening bell. Its revenues and earnings in the quarter are expected to have improved on a year-over-year basis.

In first-quarter 2020, the company’s earnings lagged the Zacks Consensus Estimate. Results were hurt because of an increase in expenses. Moreover, long-term net outflows resulted in a decline in assets under management (AUM) balance.

BlackRock does not have an impressive earnings surprise history. Its earnings have surpassed the Zacks Consensus Estimate in two and lagged in two of the trailing four quarters, with a surprise of 2.2%, on average.

BlackRock, Inc. Price and EPS Surprise
 

BlackRock, Inc. Price and EPS Surprise

BlackRock, Inc. price-eps-surprise | BlackRock, Inc. Quote

Nevertheless, the company’s business activities and prospects in the second quarter encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for earnings of $6.93 for the to-be-reported quarter has moved 5.5% upward over the past seven days. Also, the figure indicates a rise of 8.1% from the year-ago quarter’s reported number.

The consensus estimate for sales is pegged at $3.58 billion, which suggests an increase of 1.5% from the prior-year quarter’s reported number.

Major Developments During the Quarter

In May, PNC Financial PNC divested its entire 22.4% ownership interest in BlackRock through a secondary offering. Following this, BlackRock repurchased $1.1 billion worth of its shares.

Now, before we take a look at what our quantitative model predicts for the to-be-reported quarter, let’s discuss the factors that are likely to have impacted performance.

Key Factors to Note

BlackRock remains a dominant player in the ETF market, given its continued investments in the U.S. iShare core ETFs. Moreover, with investors increasing allocations toward ETFs instead of alternative investments to reduce management costs, the company’s iShares inflows have remained strong over the past several quarters.

Moreover, unlike the first quarter, which mostly saw asset outflows due to the negative impacts of the coronavirus outbreak, the second quarter has witnessed overall asset inflows. Thus, supported by inflows, BlackRock’s AUM is expected to have improved in the quarter.

Notably, driven by an expected increase in AUM, the related fee is expected to have been positively impacted.

BlackRock’s expenses have remained elevated over the past few years. As the company continues with its restructuring initiatives to modify the size and shape of its workforce and improve operating efficiency, overall costs are expected to have increased in the to-be-reported quarter as well.

Earnings Whispers

According to our quantitative model, chances of BlackRock beating the Zacks Consensus Estimate this time cannot be conclusively predicted. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is required to be confident of an earnings surprise call.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for BlackRock is 0.00%.

Zacks Rank: The company currently sports a Zacks Rank #1 (Strong Buy). While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings surprise call.

Stocks Worth a Look

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

Ameriprise Financial, Inc. AMP is expected to release earnings figures in the coming days. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.49. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Associated Banc-Corp ASB is +7.31% and it carries a Zacks Rank #3, currently. It is scheduled to report quarterly numbers on Jul 23.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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